Negative tax on employee payslip Negative tax on employee payslip
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  1. #1

    Nervous Newbie


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    Question Negative tax on employee payslip

    Hi All,

    I recently started a contact after being in permanent employment for 4+ years. I'm operating through a LTD company as director. I'm using Primo Payroll (free version).

    I updated previous income and tax deducted as per P45 on Primo payroll. I'm using standard tax code 1250L.
    Last month I paid myself a salary of £1,000. When I generated the payslip it is now showing a negative tax and as per payslip I should pay more than £1,000.

    I understand why the employee's tax is negative as it is calculated on pro-rate basis from start of the year. However I don't understand why do I have to pay this out of my business?

    Could someone please let me know how to go about this? Do I get a tax refund from HMRC for this negative tax since the excess tax is collected by HMRC and not by my business?
    Or will there be a new tax code that I'll have to use?

    Thanks.

    Regards,
    PSV

  2. #2

    More fingers than teeth

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    Your company will get a lower tax bill when you hit the threshold of paying tax /NI on the salary you're paying yourself. If you've structured your salary so you avoid all tax and NI then yourCo will have to claim a refund from HMRC.

  3. #3

    My post count is Majestic

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    1. Get an accountant
    2. Ask them
    'CUK forum personality of 2011 - Winner - Yes really!!!!

  4. #4

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    To echo NLUK sentiment...

    Why £1,000 salary? Sounds like you plucked this figure from thin air. An accountant will help.

    Most perms turned contractor pay no salary at all in the mixed tax year. An accountant would advise this.
    Given there’s likely more money at risk from getting just this wrong than an accountant would cost, think of the value added by getting all the difficult stuff right.
    See You Next Tuesday

  5. #5

    bored now

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    What NLUK and Lance say

    You need an accountant and there is zero need to be paying salary this year if you've already earn £9000 or so (can't be bothered to check the exact figure)
    merely at clientco for the entertainment

  6. #6

    Fingers like lightning


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    Quote Originally Posted by psv View Post
    Hi All,

    I recently started a contact after being in permanent employment for 4+ years. I'm operating through a LTD company as director. I'm using Primo Payroll (free version).

    I updated previous income and tax deducted as per P45 on Primo payroll. I'm using standard tax code 1250L.
    Last month I paid myself a salary of £1,000. When I generated the payslip it is now showing a negative tax and as per payslip I should pay more than £1,000.

    I understand why the employee's tax is negative as it is calculated on pro-rate basis from start of the year. However I don't understand why do I have to pay this out of my business?

    Could someone please let me know how to go about this? Do I get a tax refund from HMRC for this negative tax since the excess tax is collected by HMRC and not by my business?
    Or will there be a new tax code that I'll have to use?

    Thanks.

    Regards,
    PSV
    In short, you would pay this out of your business as it's owed to you as a wage. The process would be to submit your RTI and then give HMRC a call once they've logged the submission to request a refund of PAYE to your business. In turn, your business will then pass on the tax rebate to you as the employee. Currently, you'll be looking at about 3 months for the rebate to be paid back to your business due to backlogs.

    As it's your own company, you don't have to pay yourself the salary owed immediately if there is insufficient funds. It can be owed to you and paid over once there is enough cash.

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